Important to remember that the energy used on mining both secures current and *PAST* transactions, that's the entire point of the blockchain. I think "total value secured" captures this point.
I find it frustrating that crypto-currencies are judged by their energy usage, meanwhile traditional fiat currencies are secured by massive banking industries, governments, and militaries. The total energy required to maintain a secure and stable fiat currency is likely orders of magnitude greater than that of Bitcoin today. The problem is one is easier to calculate, so it generates easy headlines from lazy journalists.
Fundamentally energy usage isn't a worthy argument for or against a currency. It's the wrong measurement to use. It seems to be the go-to straw-man argument for those who already made up their minds about cryptocurrency before hand.
Yes, Proof-of-Stake exists, but notably it does not exist at a reasonable scale yet. If it could work as well as Proof-of-Work then it eventually would displace it. All attempts so far have not lived up to their hype.
This argument makes no sense. Bitcoin doesn't obviate the need for militaries, banks, or governments, those things would exist regardless of the type of currency being used. Furthermore, these institutions have functions that go far beyond "securing fiat currency", not to mention the fact that bitcoin's existence relies on the massive infrastructure that facilitates the power grid and internet (which are secured by governments and militaries). Beyond that, bitcoin's value is inextricably linked to the utility of government issued currencies since bitcoin is not a suitable unit of exchange in a real economy due to its miniscule transaction capacity. In a world where fiat currencies collapsed the value of bitcoin would also plummet due to the fact that bitcoin's poor throughput could not sustain the the market for staple goods such as food, water, and medicine.
The end of gold backed currencies in the 70s and replacement by fiat currencies hinged on the middle east oil states agreeing to sell oil in USD, in return for global policing by the US[1]. There is thus an intimate relationship between the current system and fossil fuels and the military, which goes beyond just ‘existing infrastructure’ arguments. This doesn’t mean we should countenance burning coal to mine bitcoin, but we shouldn’t forget history either, and as such the argument of the OP has some merit.
Second point is about transaction volume. Compared to total global money, the transaction volume of fiat is also very small. The recent money printing should make this obvious. The amount of fiat in fixed income markets and derivatives is staggering compared to what you mean by ‘transactions’[2]. Bitcoin has payment solutions in the works, it is likely that transaction volume and unit of exchange utility will increase over time. Additionally, if we take an actual example of a collapsing fiat as occurred in the hyperinflationary period in Brazil in 1994, the Government fixed the problem by inventing a new currency [3]. It is quite possible that in the current era, countries with collapsing fiats would use cryptocurrencies for this purpose, as there are some obvious advantages.
[1] https://www.lynalden.com/fraying-petrodollar-system/ [2] https://www.marketwatch.com/story/this-is-how-much-money-exi... [3] https://en.m.wikipedia.org/wiki/Hyperinflation_in_Brazil
Even granting this premise, the argument still makes no sense. Governments, banks, and militaries existed for centuries prior to the existence of even the U.S. itself, so the suggestion that these institutions are somehow a product of U.S. monetary policy in the 70s is absurd on its face. I also think it's important not to "forget history" and the history of these institutions far exceeds what that argument grants.
> Compared to total global money, the transaction volume of fiat is also very small.
This is also beside the point. Bitcoin's value is highly dependent on the utility of government issued currency so that people can obtain staple goods and services that have inherent value, bitcoin is simply not able to fill this role.
> Bitcoin has payment solutions in the works, it is likely that transaction volume and unit of exchange utility will increase over time
There is always a myriad number of solutions in the works, but they don't actually mean anything until they solve the problem.
As to long term hyper inflation, you can only get long term hyper inflation if the country prints more currency. Suppose 1 trillion USD was worth 1 apple, and the US economy was even 1% as large as today, and their was the same number of USD in circulation, and the IRS only accepted taxes paid in USD. Now suddenly a lot of people really really want USD to pay taxes as their hypothetical tax bills are larger than the amount of USD possible to acquire. Except people constantly need to pay taxes so that can’t happen. What can happen is significant shifts in USD’s vale, aka it can go up or down within a range or the US can print a lot more currency.
1. By that logic bitcoin is also supported by the military, education system, banking industries etc. It relies on a secure society that has power and internet and computers and wealth for citizens to have and use these things as a prerequisite.
2. The military etc you mention actually is the basis of alot more in society than just fiat currency. So your formula "Energy used / total value secured". If you want to include those things in "energy used" then under "total value secured" you need to include basically all value ever created by humans in western countries which is in the hundreds of trillions (if not more). Not just fiat currency. And actually if we went back to the gold standard all those institutions would still need to exist to secure society. (banks, governments, and militaries existed long before we abandoned the gold standard.)
Overall its a silly concept/argument.
Crypto-currencies are also secured by those things in their present state. So long as crypto remains a small portion of the overall economy, it depends on the mainstream economy for its existence. For instance, it can't exist without an economic infrastructure that can develop and produce computer chips, telecommunications, the electric grid, and so forth.
The energy cost of Crypto is on top of the cost and externalities of the present day economic infrastructure.
That sort of argument would need some extraordinary evidence, given the sort of chaotic, crime-ridden, violent state places without governments tend to devolve into.
You're entitled to your beliefs, OTOH I believe that the free market cannot work unfettered. Monopolistic behaviour of large corporations shows us this again and again and again, as do environmental and Labour abuses and a million and one things people will do to screw each other over for a fast buck.
I think your view is extremely naive.
Negative externalities, like environmental damage, should ideally be internalized, although I grant that this is not always easy. Private ownership of all land might help, as public ownership dilutes responsibility.
> I think your view is extremely naive.
Isn't it interesting that I think the same about your view? :)
This is just more libertarian apologetics. There have been more than enough examples (cough intel *cough) of monopolistic practices caused by unfair market practices. Using dominance to force suppliers to exclusive use of your products is not a practice enabled by the state.
> Private ownership of all land might help
Rivers too? And then what? I can sue you for polluting my downstream, but it's OK if a company just buys up the whole river, then they can ruin it to their heart's content?
This is just nonsense.
Microchip fabrication is a very lucrative business, so why aren't there more competitors to Intel? I can think of at least two reasons:
1. It's a very capital-intensive industry. Here all government disincentives to saving, investment and business operation apply, mostly in the way of taxes, but also things like the SEC "accredited investor" qualification, restrictions to investment from foreign sources, barriers to crowdsourcing, licenses and bureaucracy, and a long etcetera.
2. Patents and copyright. Because of these government-granted monopolies competitors cannot copy products, so they represent another barrier to entry. Granted the idea behind patents is to incentivize private-funded research, but the drawback is reduced competition for the time the patents lasts. I believe patents are too long-lived in a world that moves at an ever-increasing pace.
If there were more real competitors there would be more suppliers willing to not sign with Intel. There would also be more competitors in the supplying space, of course.
>> Private ownership of all land might help
> Rivers too? And then what? I can sue you for polluting my downstream, but it's OK if a company just buys up the whole river, then they can ruin it to their heart's content?
People rarely ruin their own property, on the contrary they make an effort to preserve it and keep their value high. Public-owned property, on the other hand, has no such incentive. This is why people don't treat a hotel room or AirBnB with the same care as their own house. Like it or not humans are moved by incentives, not by ideals, so we should take that into account when designing our policies. In other words: policies should be judged by their results, not by their intentions.
In the case of the river it might make sense to have some kind of joint ownership by people and/or companies involved with it. Please notice that private ownership doesn't mean individual. Even assuming that a single company or individual owns the river and that they have more to gain by polluting the river than keeping it clean, they couldn't just dump whatever they want in there, as it gets to the sea. An effort should be made to factor in all negative externalities.
> This is just nonsense.
I don't think so, and neither do many renowned economists. I think you lack imagination or are misconstruing the libertarian proposals. The idea is not "get rid of every and all regulations", but being aware that regulations, taxes and centralization of the economy have rippling effects that, when combined, greatly reduce the wealth generation for all of us.
So, just completely ignore the anti-competitive contracts it forced on suppliers, and other market-dominating tactics it was convicted of, in favour of some handwaving about patents.
Good, honest argumentation there.
> People rarely ruin their own property
Again, utterly naive given what we know happens in the real world. Companies can and will act like utter sociopaths in pursuit of short term gain.
> I think you lack imagination
And I think you lack any attachment to what people and companies actually do, here in the real world, rather than what you imagine economic incentives might make people do.
You say "libertarian" but then you reject intellectual property.
No way. You hear this argument all the time — that fiat currency also uses tons of energy - but I just don’t think it’s true (relative to the amount of transaction throughout, and also in absolute terms). Bitcoin mining uses something like 0.5-0.6% of global electricity consumption for a tiny, tiny fraction of (purely speculative, not economically meaningful) transactions. What % do you think fiat uses?
The fact Bitcoin could be more efficient and chooses not to isn't really an improvement over being unable to be more efficient IMHO - in fact arguably it's worse.
At the technical level BCH has showed that the network is stable in production with 20 MiB blocks, but the goal and ongoing work is to support gigabyte and eventually terabyte blocks so it would scale to worldwide usage while keeping transaction fees low. The counterargument by Bitcoin BTC is that large blocks centralize the network, as not everyone can afford to run a full node. That's a different debate that I would be happy to discuss, but I want to start by pointing out that keeping the block size low also centralizes the network, as many users will not be able to afford the increasing transaction fees (which rose to $50 at recent times). Does it make sense to restrict the network so anyone can run a $50 node but not be able to transact on it? I think decentralization is a means to an end (electronic P2P cash), not a goal in itself. In other words, blockchains should be decentralized enough that no single entity can take control of the network, but too much decentralization is inefficient, so an equilibrium must be found.
I believe that is the hardest problem that bitcoin didn‘t solve. The hashrate is governed by the price and a arbitrary halving schedule. There is no mechanism to regulate the hashrate to a certain setpoint where attacking the network is not feasible. This issue becomes even more severe when the block reward is dominated by fees in the future. In that scenario the hashrate is not so much determined by the price anymore but the available block space and the utility of on-chain transactions. It is really hard to judge bitcoins security model considering all these variables. But for now the solution seems to be to vastly overcommit hashrate
It's easy to increase the block size, but it's very unlikely it would ever be decreased again, so it makes sense to wait until there is no other option.
More on that here: https://twitter.com/DocumentingBTC/status/139399717145689293...
And you can even buy books explaining this way better than I (or twitter) can.
That doesn't make any sense. Any actor, like for example a government, might seize (control) a blockchain by having overwhelming mining majority (51% attack), but that has little to do with the size of the blockchain itself.
The only reason one might have to think that way is believing the false narrative that a BTC "full node" does anything to secure the network. Only mining nodes secure the network, having a copy of the full blockchain is not enough.
Edit: typo.
But as far as I know the maximal number of transactions is capped in practice.
Furthermore the security of PoW is based on it being far more expensive to mess with it then to mine it. But if you push more mommy through the same number of blocks it's at some point breaking apart.
Lastly no one says it will ever consume all energy. That works be absurd. It's about the required energy (and hardware cost) in relationship to the provided value being unhinged and for security you need steadily increasing energy costs for increased usage.
What do you mean? There are no hard technical impediments to Bitcoin being able to scale to worldwide usage with basically the same structure as today. It's a matter of optimizing software and having powerful hardware (that is available today, and will be even cheaper in the future). This article by Johannes Vermorel [1] goes over it in detail.
If you have any evidence that goes counter to this I would love to read more about it.
[1] http://blog.vermorel.com/journal/2017/12/17/terabyte-blocks-...
“The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”
Carbon footprint is a totally valid measure for anything we create or maintain, including crypto and fiat currencies.
- Bitcoin is operating at capacity and has shown unwillingness to adjust capacity, so the "kWh/tx" is valid for Bitcoin.
- Transaction fees increase the block reward, and as a consequence, the energy that can be used for mining before it becomes unprofitable. This is currently only about 10% of the total reward miners get for mining a block on the Bitcoin (BTC) blockchain, but it is something to consider. The corresponding part of the energy usage would, at a fixed fee, be proportional to transactions.
Bitcoin's layer 1 is operating at capacity - different networks make different tradeoffs. Bitcoin has gone the "less change" and "more decentralization" route by keeping layer 1 small, with the goal of moving transaction volume to layer 2.
Bitcoin introduced a number of changes like SegWit that are way more complex than adjusting a constant on layer 1, plus a huge amount of complexity on layer 2 that makes using layer 2 just as complicated as (or more complicated than) using a different cryptocurrency.
Whether it leads to "more decentralization" when everyone can run their own (L1) node but a single L1 transaction costs as much as the node hardware is quite debatable IMO. By making L1 transactions unaffordable, it encourages _centralized_ solutions where IOUs are shuffled around entirely off-chain.
Even if second layer solutions become highly centralized, the risk is significantly mitigated if you just don't keep your savings on them. If popular second layer solutions become untrustworthy then it would be easy to switch to different ones.
1) Inflation rate
2) PoW function
3) Transaction cost after blocksize limit reached
The inflation rate determines the incentive given to miners. With less incentive, the energy use will go down. This comes at the cost of increasing the ease of a double-spend, but there is already far more than enough difficulty to double-spend at the current mining rates.
The PoW function determines the capital cost required to buy the miners themselves. If you increase the capital costs (e.g. with a memory-hard PoW function, or requiring less-efficient GPUs instead of more-efficient ASICs) then miners will be able to spend less of their costs on energy. This is one way in which Eth does well by the above metric, and is a valid way to reduce energy usage in PoW.
Of course, transitioning to proof-of-stake (as eth is doing) will eliminate the energy problem entirely.
Finally, some blockchains (e.g. BTC, ETH) have reached their capacity of transactions per second, and then users can add a fee to each transaction to incentivize mining pools to include them in a block. These fees do add incentive for miners to dump energy into their blocks. However, they are a much smaller portion of the incentive than you would expect.
Reference: https://hbr.org/2021/05/how-much-energy-does-bitcoin-actuall...
You can say the same thing about ANY activity that isn't an arbitrarily defined form of altruism. Sports? Concerts? Video games? All vast wastes of time, money, and energy that could be spent fighting poverty or feeding the poor. This betrays the intention of criticizing bitcoin's energy usage because it moves the goal post of "...but but it's not using renewable energy" to "...but but that renewable energy is not being used for what I want it to be used for".
You are also assuming that only renewable energy will be used for mining in the first place. I don't think that is a given: As long as it stays profitable no matter how, miners will exploit any resource that is available to them, literally burning resources for money in their wallet. Cryptocurrencies are decentralized by design, so while the US for example can stop the use or import of inefficient stadium lighting technologies, there is no way to apply a carbon tax or stop the "import" of cryptocurrency mined through "dirty" means.
This isn't as clear cut as it sounds. The Jevons paradox: as enegry efficiency goes up, enegry demand goes up by more. Or, put another way: humans wasted less electricity 20 years ago with incandescent bulbs than we do now with LEDs. One could also say that LED efficiency is counteracted by tech improvements. But in reality, we may be using more energy, but we're also doing more, and doing things we couldn't have done 20 years ago.
I'm skeptical of assigning a value judgment to things that a lot of people find valuable. LEDs are used for bigger, brighter advertisements. If I don't personally like ads, does that mean energy efficient LEDs are a waste? Bitcoin mining is used to secure a ledger from attackers with the resources of a nation state. If I don't personally care about a secure ledger, does that mean mining is a waste?
And about profitability, this is important, and new within just the past few years: renewable energy is the cheapest energy. [1] Anyone mining with coal is behind the times and will be competed out of the market in due time. The more incentive people have to seek out the cheapest energy, the higher the demand for renewables will be, and the faster the world will get on board. I for one welcome this catalyst.
To "mine" a block, a miner attaches a random number to the content of the block (the content mostly being the actual transactions), performs a difficult calculation on the entirety (i.e. block and random number), and checks whether the result of that calculation matches a prescribed goal. The goal is to have at least a certain amount of leading zeroes in the resulting number, and it is (to everyone's best knowledge) impossible to know how many leading zeroes there will be without performing the calculation. That is the literal goal, not an analogy.
In the massively overwhelming majority of tries, this goal is not reached. The calculation was useless, and the miner tries again with a different random number attached to the block. There is no other value to the calculation than to reach the arbitrary goal. If the goal is reached, the miner has won the lottery: All participating nodes in the network accept the result (the calculation is easy to verify) and the miner may claim the rewards for themselves.
The amount of leading zeroes to achieve is directly tied to the mutually agreed upon "difficulty". If mining becomes easier and the lottery is won too quickly (say because new faster ASICs flood the market, or more miners participate), the network adjusts the difficulty up, meaning more leading zeroes, so that the overall chances of winning the lottery within a given time frame stays stable.
The cost of proof-of-work is paid by the network participants. When you transact on Bitcoin or Ethereum, you pay massive fees to proof of work miners that significantly limits the number of things you can do productively. Dozens of interesting use cases on Ethereum are made completely non-viable by fees that sometimes break $100 per transaction.
Proof of work cryptocurrencies however exist in a competitive environment with other cryptocurrencies. If a new cryptocurrency launches that can provide the same utility and security guarantees at a lower cost (either through less work, or through some other means) you will have a natural migration of users from the more expensive cryptocurrency to the cheaper cryptocurrency.
At equilibrium (which we may not be at, given all the hype currently), a proof of work cryptocurrency is only sustainable if its cost structure is competitive. There is an active incentive applied to the entire space to invent more efficient means to transact in a decentralized way, so that participants don't have to pay such high transaction fees and inflation costs to update a decentralized ledger.
> Cryptocurrencies are decentralized by design, so while the US for example can stop the use or import of inefficient stadium lighting technologies, there is no way to apply a carbon tax or stop the "import" of cryptocurrency mined through "dirty" means.
This approximately applies to all manufacturing though. What percentage of US goods are manufactured in regions that have limited regulation regarding the environment? Most of them, because if you don't use those regions, you are going to have trouble competing in the marketplace. It IS a problem for Bitcoin, but it's also a problem for all global production in general.
This seems to be purely theoretical.
In the real world, most people stick with the recognised names regardless.
The rest of your post could be read as a criticism against incomplete application of hypothetical carbon taxation regimes. It seems weird to single out PoW cryptocurrency as the one and only benefactor to a patchwork carbon taxation regime globally.
Let's say a new ASIC comes out that mines twice as efficiently, i.e. 2x less energy per calculation. Because miners can now afford to run twice the amount of ASICs on the same energy budget, this means that eventually miners are mining twice as fast.
The network however needs to keep the block rate constant (6 blocks per hour in Bitcoin), so it counteracts by adjusting the difficulty. In this case, mining a block becomes twice as difficult. In summary, everyone has now twice the amount of ASICs consuming the same amount of energy, still mining at 6 blocks per hour.
The misconception is that the "work" in "proof-of-work" is meaningful by itself. It is actually not, it is a lottery whose probability to win is adjusted exactly so that statistically, all miners in the world together will mine 6 blocks per hour on average.
As for "mining at a loss": I am not convinced there is a general principle that only allows for absolutely clean energy to make mining profitable, across the whole world and in any situation. We have already seen a coal plant being ramped up for the purpose of mining in New York, and hash rate going down when coal plants in China got flooded.
> If a proof-of-work cryptocurrency holds its price, its energy usage can only go up
But in fact, if BTC holds its price, Bitcoin miners won’t increase their energy usage — unless they’re willing to mine at a loss.
> If a proof-of-work cryptocurrency holds its price, its energy usage can only go up
“Energy usage can only go up”
Only go up? When price is flat? I’m really sorry, but it seems you’re just grasping at straws, here.
A decentralized/borderless/censorship-resistant/virtual currency is one of the most productive things we can use energy for. It might not be as apparent in the US or the developed world, but Bitcoin is a life-saver for many people in countries with crumbling currencies. We waste a lot of energy on things that are far more more useless (like christmas lights for example[1]).
We should just put carbon tax on everything with environmental side effects and let the market decides what's a productive use case vs one that isn't.
1: https://bitcoinist.com/bitcoin-mining-energy-consumption-us-...
How do you enforce carbon taxes on miners under a defunct government in a remote location of the world?
Not for a general audience. The purpose of a currency is to enable transactions. Internally, I get why people involved might fuss about the metric. But from the societal perspective it's reasonable to ask, "What does it cost per unit of value created?"
The way I like to explain it is that Bitcoin is collectively giving away about $1.5 billion a month in prize money to miners. That's the root of the problem. Miners will spend up to $1.5 billion a month on electricity (mainly) and their other expenses. Currently it's about 10x Google's electricity usage.
Total revenue is proportional to the block reward (an algorithmic parameter) and Bitcoin price. So to fix this, either they could reduce the block reward ahead of schedule (won't happen) or something could happen to crash Bitcoin's price. More transaction volume would actually be better if it were due to a fire sale.
Taxing holdings of Bitcoin would be a way to convince people and businesses to sell and discourage buying, at least for those that pay their taxes.
Or who knows, maybe threatening to do this would result in enough consensus to accelerate the block reward halving schedule?
If you implement proof of stake, for example (where the scarce resource becomes the currency of the network itself, which is a lot trickier to implement and especially quite hard to bootstrap from nothing because in the early days of a currency there's going to be only a few people owning it), then there's no need for the reward process to be a lottery (though it still can be).
The proof of stake proposals don’t seem to work that way. They seem to be more a matter of stakeholders having machines that vote about who is trustworthy.
You need something to be the limiting factor on the amount that you can try to win such a lottery. With proof of work, it's electricity. (assuming everyone is about as efficient as each other) Early on, they talked about it being proportional to cpu-time. That has become more abstract since.
I haven't heard of any cryptos that require you to risk your coins to mine. Sounds like a neat gimmick, but hard to implement.
There is already massive interest in finding more efficient ways to solve the problem. It's a difficult problem to solve (as Elon Musk will likely learn in the coming year).
The cost of proof of work is paid in two forms. The first is in the form of inflation. Merely holding onto Bitcoin means eating dilution as new Bitcoins are printed to fund the mining ecosystem. And the second cost is in terms of transaction fees. At times, it can cost $20+ to send a transaction over the Bitcoin network, and a more efficient / higher throughput system could significantly reduce these fees.
The users of Bitcoin are already themselves naturally incentivized to look for better solutions, even completely absent any care about the environment.
More enlightened self-interest would be to want to see the price go up without using more electricity, but this is secondary to the primary incentive.
To get action from enlightened self-interest, there needs to be leadership for making changes. (Ethereum seems to have this?)
Knowledge preceedes enlightenment. For example, Git is also green-friendly, and shares a virtually identical consensus model to pure PoS consensus designs. It’s just that “green-friendliness” wasn’t a design goal of cryptocurrency — creating a lasting store of value sans institutions, exchangeable pseudonymously over the internet, was.
As it were, pure PoS consensus suffers from the misfeature of not even having a quantitative fork ranking protocol — i.e. it lacks a way to objectively compare the truthfulness of divergent blockchains [1]. In PoW networks, cumulative hashing power can be simply and easily mathematically compared to produce cold, quantitative consensus. In PoS networks, there is no hashing power, and human intervention is required — just like Git.
Which begs the question, why do PoS networks even need a blockchain? I think we all know the reason for that, though — Git doesn’t have a hype train. Git just isn’t good enough at separating the general public from their hard-earned money.
Git was designed for cooperative work, and critically depends on trust (commit access).
Merkle trees are easy, scalable schemes of trustless consensus, less so :(
This would imply the users of Bitcoin use it for anything more than speculative investment.
Something that also seems to get lost in the mix frequently is the fact that bitcoin owners themselves are the ones paying for the electricity. The security benefit comes at a cost - manifested as inflation (not just transaction fees) - and that cost is borne by all of the owners of Bitcoin. To that extent, the participants in Bitcoin are actually incentivized to use more efficient systems, because it means the inflation cost of being a participant is lower.
That they don't use cheaper systems indicates (though there are plenty of confounding factors) that they see value in paying the larger cost of holding Bitcoin.
And Bitcoin users are only paying the fraction of the cost paid for energy. But that ignores negative externalities like the pollution that's the subject of the article.
Then you have to define value. I don't think it's transactions. Any random bank can make transactions. People can transact with cash.
Cryptocurrencies create value by providing other properties such as decentralization, trustlessness, privacy. For example, Monero enables private and untraceable transactions and for privacy enthusiasts it has essentially infinite value.
With this definition of value, we can see how bitcoin isn't providing much. By now it's centralized, has no privacy, has high fees... It sucks basically. The only reason it's still the number one currency seems to be inertia. It's the most frustrating thing about this market honestly. Not only is bitcoin still king but it drags down better coins when its value plummets.
If you wanted to know how much people are willing to pay for decentralisation, trustlessness and privacy (most certainly not an infinite amount of money) you could also do that, but that's answering a different question.
Why transact via cryptocurrencies instead of other systems? Because of these other desirable properties. They're the value cryptocurrencies add to the world and the reason why people choose to them despite the inefficiency. People transact in Ethereum because they want to run smart contracts. People transact in Monero because they want privacy.
> So it absolutely makes perfect sense to measure how efficient these systems are processing transactions, and the way to measure that is by looking at how much it costs to process a transaction with each of these systems.
I don't think so. People measure this in order to compare with traditional banking systems which are centralized, require trust in institutions and affords no privacy. This is not a fair comparison.
This is a big assumption, and almost certainly untrue.
That's an ok general rule, but it breaks down in a lot of circumstances. Look at scams, for example. People pay quite a lot for them, but at a societal level, they have strong negative value.
Interesting.
> For example, Monero enables private and untraceable transactions [...]
So so...
> Cryptocurrencies create value by providing other properties such as decentralization, trustlessness, privacy.
Let's add "a largely unregulated gambling area where people with too much money can bet their excess money on being among those who pull out before the music eventually stops" to that list, shall we?
That's also where your frustration comes from: Bitcoin is perfectly fine for this kind of "value proposition", hence it stays King of the Hill.
What I mean is people can transact via traditional systems just fine and they choose cryptocurrency because of other qualities.
> largely unregulated gambling area
The speculation is a separate thing from the coins themselves. People also speculate with fiat currencies, stocks, real estate.
> That's also where your frustration comes from: Bitcoin is perfectly fine for this kind of "value proposition", hence it stays King of the Hill.
Yes. What I don't understand is how it drags the whole market along with it no matter where it goes.
No, speculation is the primary use case for all of these coins right now.
And crypto currency has some advantages over the other speculation options you mentioned:
- more people can participate because of them being unregulated (compare: forex trading, which has much higher barriers of entry)
- it is rather easy to not pay taxes on crypto gains in many countries, especially if you're staying below certain limits
And the most important of them all: the crypto cake is still expanding and has been expanding for over ten years now. That is the crucial difference between classic forex trading and crypto - in forex, the comparative value of different currencies usually stays within a certain range. It goes up and it goes down. In crypto, the crypto just has been getting more and more valuable over the long term. It goes up, and up, and down, and further up than before again, and then some more up.
As long as this continues, any gambler betting on crypto has an edge and will win more than he loses. Of course it can't continue like this forever, but that's easy to ignore when looking at a ten year history of unbelievable gains.
That would be like saying "you need light to your math homework so we will measure how many math problems you can do per lumen of light".
The throughput of transactions is not coupled to the amount of electricity used to mine. They are two elements in the system, that doesn't mean they move proportionally in any way.
So fine, "kWh per available transaction-second" may be a more apt moniker however that's strictly what I've been talking about. Since 100% of electricity usage is attributable to mutations, this is a completely fair quantization. As blocks have been overwhelmingly full for years, the point on discrepancy is pretty much moot.
And further, the point is a dump truck is totally unsuitable for use as a school bus.
You are more than welcome to measure Wh of electricity used per math question in regards to the lighting setup. You'll find that number small and irrelevant, however. On the other hand if it requires a few thousand kWh worth of light to do a math question, you're well within your rights to ask (a) why you're doing math questions in what must be a stadium setting and (b) whether there's a more efficient lighting solution.
Which are exactly the questions we're asking here.
So, respectfully, that's exactly how logic works.
Bitcoin's electricity use it because of its sustained price. If the miners could not consistently sell for high prices the overall electricity use would go down. Price/electricity usage going up or down does not affect throughput over the long term.
Bitcoin's throughput is from being artificially crippled to sell a second layer. If the maximum block size was raised, it would have more throughput. The max block size does not change the amount of electricity used from the block reward.
The same way that you would not measure your internet connection on mb per kw/hr since the energy used by 10mbs service is going to be the same as 1000gbs service. The two things are barely correlated.
Energy per transaction is barely correlated. I know it is simple and easy to look at two numbers and pretend they depend on each other, but that isn't the dynamic here, which is why everything you are saying is nonsense.
> ... which is why everything you are saying is nonsense.
You're being rude again. Once again this is against the site terms. I'm happy to engage in any civil conversation with you that doesn't involve name-calling, as I'm sure you've seen a number of times. This thread, however is closed.
You may wanna chat with your mother for a second opinion ;)
> No one is complaining and no one said "haters", these are things you hallucinated.
I didn't say you said 'haters' that's a stylized/flourished way of saying an opposing viewpoint. That's why it's in quotes. If anything it was self-deprecating/deferential with respect to my biases. Jumping in with "that's not how logic works" is certainly a valid thing to call out as whining or complaining because again it's not particularly civil. Off the basis of your misinterpretation you once again accuse your counter-party of 'hallucinating.'
As I said this thread is over and should in the future you decide to have a civil conversation I'll happily engage.
You seem happy to engage on how something is being said, but not so much on what is being said.
Of course, because I'm here to have an interesting conversation about an idea on its own merits, not be accused of hallucinating when you misinterpret something I've said. If you stop attacking the speaker, assumed some good faith, and have a civil conversation I suspect you'd have a better time.
Normally I have much more tolerance for shenanigans but you've demonstrated a pattern in our interactions.
We know that. This is not an argument against cost per transaction being an adequate measure of efficiency for a transaction processing system.
Not only that, but not all cryptocurrencies are even trying to optimize for this. I would say that bitcoin is actually in the opposite direction and trying to be as expensive per transaction for both the miners and users as possible.
Exactly, that's why if you're using this list to somehow decide coin X is more "efficient" than coin Y, then it's a foolhardy exercise.
For proof of work to actually work, the cost of the electricity has to be proportional to the total market cap of the coin. Otherwise, if the amount of work was low compared to the value of the network, it would be a strong incentive for someone to try to attack it.
That might even be a tolerable mindset if you happen to live in a cold place and the only tool available to keep you from freezing to death was electricity.
If we as a society feel like there is too much energy being consumed, we should regulate the production, and let the market come to equilibrium on a fair price for the cost of electricity. If you don't like the fact that coal plants are spewing millions of tons of CO2 into the atmosphere, regulate the coal plants, not Bitcoin. Regulation of electricity will increase the cost of electricity, which will naturally reduce the total amount of electrify that Bitcoin uses - Bitcoin's energy use is proportional to the price of energy, not to the actual quantity of energy.
But people do need to be aware of the environmental costs of such things, because society does not account for negative externalities.
> regulate the coal plants, not Bitcoin. Regulation of electricity will increase the cost of electricity
What if society actually thinks it's reasonable to discriminate on energy use? What if we want to provide cheap-ish energy for end-consumers, for essential services like the medical sector, but not for cryptocurrencies?
Seems like a fine choice for a society to make.
For example, one could naively believe that there's absolutely no marginal emission from deciding to get on a plane. The plane is emitting basically the same amount whether there's 99 people on board or 99 + 1 (you) on board, and the plane's going to make that particular flight whether or not you get on. However, you're funding the airline industry and increasing demand (and therefore supply) for flights along that route and perhaps also indirectly helping pay for other things the airline is doing, so that could probably be considered a marginal emission contribution.
If you ignore transaction fees for a moment, it seems like this logic doesn't quite work for cryptocurrency networks. It seems like a closer analogy would be something like a contrived scenario with an airline that has routes which are absolutely static and predetermined (e.g. a contrived scenario where an airline decides it's going to fly a passenger plane a certain route once per day every day at the exact same time for a year no matter what, even if no one's aboard, and also the tickets are free if assuming no transaction fees). There are still the indirect issues with supporting the network, but it seems like there's less of a marginal emission concern if you're someone who's just making transactions, or arguably even no marginal emission concern.
In reality, you are adding some marginal emissions due to transaction fees (direct incentive to mine), and the indirect incentives could maybe be broken down into something marginal as well (no one using the network = no incentive to mine since the currency would probably have no value), but basically it kind of feels like there's less of a direct marginal emission concern as an end user of the network compared to something like getting on a plane, especially if you take transaction fees out of the equation. In that sense, it feels like abstaining is somewhat more of a moral protest rather than a direct economic "vote" or boycott.
Am I wrong about any of this? I probably am; this is just a random thought. Maybe the transaction fees are the crux of it (even if the block rewards are much more lucrative), so eliminating them from the equation for the sake of argument makes the whole point moot?
But still at one point it confirmed more transactions than BTC + ETH + LTC combined without tx fees and sub-second confirmation time:
https://www.reddit.com/r/nanocurrency/comments/lxbhh5/nano_c...
The spam is becoming a too big problem, but they're trying to mitigate it in the new versions:
https://www.reddit.com/r/nanocurrency/comments/namwzf/v22_hi...
We don't need all those miners like you and mining and consuming terrawats of energy?
And at the end of the day, when i own bitcoins or take part in bitcoins in any form i have a green thumb and our planet is not additonally getting destroyed through the massive amount of energy consumed into finding the right hash?
Did you finnaly convince yourself that just because you consume water energy what you are doing is okay?
"We believe that Bitcoin and other CryptoCurrencies will play an important role in the future of finance, technology and governance. We conduct our business in a way that protects the blockchain against plurality attacks, and our planet's climate against warming."
Let me ask you a few questions to your statement:
Why do you support Bitcoin in particular and name bitcoin and don't use something like etherium which is potentially switching to PoS?
The energy you consume (apparently already 2 mega watts) how do you know that this energy couldn't have been used for something which creates direct and longlasting value?
Do you make any investments into renewable energy?
How do you feel about bitcoin using as a whole system (where you part of) a lot of energy?
How do you feel about bitcoin using a lot of dirty energy?
What is your take on how bitcoin can help global warming (and i actually mean cooling down the planet not activly heating it)?
Do you use your waste heat in any form or do you heat the environment with it?
Have you / your company invested in any form of research or change to bitcoin itself to reduce its 'energy consumption for preventing double-spend'?
Do you believe in the future of PoW or PoS? If you believe in PoS why do you support currently bitcoin?
Biden (after other countries have done this much earlier) is now back on climate change support and targets 0 emissions. How do you think the future with bitcoin and 0 emission will look like?
And at the end of the day: Based on your FAQ and the increase of power prices, will you able to consume that much energy for bitcoin in the long run?
I imagine Bitcoin would fair terribly and Monero would be the best.
Blockchains all have a bottleneck. All transactions in the world have to go through the miner. And the situation is actually worse than that because we don't know who will solve the useless Proof of Work hashcash function ahead of time, so EVERY potential transaction is gossipped to EVERY potential miner, and then the miners ALL go to town wasting electricity. How great!
Anyway, because of this architecture (preventing double-spending by literally aggregating all ambiguities into N potential histories of EVERYTHING, and then having them duke it out with PoW or PoS or any other way), we literally have a cap on how many "TPS" (Transactions Per Second) can go through.
Before Bitcoin, no one ever asked how many transactions per second an Internet protocol could support. It would be ridiculous to ask that of HTTP, or FTP or SMTP because there is no central bottleneck: the number of websites, files and emails that can be sent increases with the number of computers on the network.
With Bitcoin, Ethereum and other blockchain-based networks, this is not the case. The max number of transactions that fit inside a block is the most throughput you're going to get. The best thing to come out of these blockchains is Microsoft's Sidetree protocol championed by @csuwildcat but that's for identities, not currencies. So basically, you have a payment system which is super-secure and also super-wasteful.
It's as if BitTorrent required every computer to seed every movie, and BitTorrent maximalists called everything else that used a Kademlia DHT a ShitTorrent.
Except here, it's actually worse because you're not doing Proof of SpaceTime (like FileCoin) but you're requiring a growing number of computers to participate in a lottery proving they burn electricity and get rewarded sometimes. And this amount of computers is growing, just so we can do one operation (transfer money) 10 times a second. At least Ethereum made it into virtual machine capable of executingmore than one operation, thus enabling Turing-complete programming languages like Solidity, and smart contracts. Still, the way it's designed as a "world computer" it's basically a glorified mainframe, and gas is basically paying for time on the mainframe. It is the reason "flash loans" are even possible, they are artifacts of the idea that literally ONE transaction in the entire world can happen at any given time. Nice for atomicity guarantees, I guess, but overall not so great for almost every real world application.
Blockchains with global consensus about every transaction in the world are NOT what I would think of when I think "decentralized" in the sense of having no central bottlenecks. Actually @vbuterin wrote a great article years ago about the different senses of the word "decentralized".
Unless you buy straight from a miner, the Bitcoin you buy changed hands many times before reaching you and those transfers didn't all occur on the blockchain (could have happened on an exchange, could have happened on lightning network, could happen on another blockchain like eth).
If you look at actual transactions on the blockchain, you'll see that they have an average value of ~300-400K [1] per transaction which means it's acting as final settlement.
1: https://bitinfocharts.com/comparison/bitcoin-transactionvalu...
The main point that you should understand is that a PoW blockchain's energy usage is not proportional to its transactions.
I'll say that a different way: the transactions themselves do not use any energy in mining.
I'll say this in a third way: it takes exactly the same amount of energy to mine an empty block as it does a 1GB block of transactions, as it does a 1,000,000,000 PB block.
In reality, transactions are all hashed together in a mining pool into a single numeric hash before miners ever see them. It doesn't matter how many transactions are included in the hash. The hashpower just has to find a magic number matching that hash.
On the other hand, the #1 factor that increases a blockchain's energy usage is its price per coin. The price of a coin is how much that coin is worth to be mined, which is the incentive for miners to dump energy into mining it. In steady state, miners will dump energy into mining a coin until the cost of energy = the value of the coins coming out.
This is why you can see Bitcoin SV at the top of the list -- it's worth the least of the Bitcoins.
And it's also misleading to compute the second factor -- transactions per second -- by counting the actual transactions on the blockchain, rather than looking at the transaction capacity. Because blockchains only cost something per transaction once they reach capacity. This is misleading with Bitcoin SV, for instance, because that coin artificially creates bogus transactions on its blockchain in order to make it look popular and demonstrate the vision of large blockchains. Bitcoin Cash, on the other hand, can handle a thousands of transactions per second (on testnet) but doesn't clog its live blockchain with them.
So, in sum, if you send a transaction on Bitcoin Cash, it will cost 0 kW of electricity, even though it says 31.3 Txs/MWh (which equates to 31.9kW/Tx) in this chart. This is because transactions do not cost anything in electricity. Electricity only goes to preventing double-spends. A better metric would be "energy use per double-spend that was prevented."