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.
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.