But yes, with your point overall I agree, like in 10 years or something it doesn't seem workable without major changes. Wasn't that what lightening or side chains were supposed to do?
Any way, also, I don't own any crypto and I'm definitely not defending it. Feel free to correct me too if I'm mistaken, anyone.
As the block reward goes down (and it is dropping), the rewards of mining also drop, so you have a reasonable argument that the power use is transitory until the block reward goes to 0. However, it looks like this may end up being made up with transaction fees because the transaction throughput of bitcoin is also really low.
Lightning and other solutions are supposed to fix the transaction throughput, but they have limitations.
Close, but not correct. As the price of BTC goes up, so does the expected reward for mining any given block, making it profitable to spend more electricity in pursuit of the rewards. This results in a net increase in electricity usage as everyone spends more in an attempt to capture the rising value of mining a block successfully.
In practice each miner is incentivized to spend an equal amount in electricity per block (at local rates) as the expected reward per block will net them. This results in a 51% attack being inordinately expensive, which was the point of the original design.
And thereby offsetting other inelastic demand for electricity, forcing them to count on non-renewables instead.
Bitcoin might be renewable if every single miner pinky swears to turn their rigs off the moment renewables stop over-producing, but come on, nobody believes that'll happen.
> Despite what the born-again eco-warriors have to say about consumption and the environment, Bitcoin can actually be an incentive for safe energy sources.
Interesting you've got to put an ad hominem in there about people who care about the environment. Probably not a good sign for the second half of this sentence, and it makes me wonder if you're representing other's positions in good faith.
Also, oops: https://e360.yale.edu/digest/bitcoin-miners-resurrect-fossil...
Sure, bitcoin miners will use cheap renewables if they're available. They'll also happily use whatever the hell is available too given the opportunity, since they need to use so much of the stuff. They're particularly notorious for driving up electricity rates locally as they turn previously abundant renewable hydro energy into a over-subscribed resource, requiring towns to import electricity from, yes, fossil fuel plants.
If 1 coin costs $50,000, and you already own the rig, it's worth spending $49,999 on electricity to mine the next coin and you will make a profit. If you're rig can't do that, you're better off just turning it off.
> Every 2,016 blocks (approximately 14 days given roughly 10 minutes per block), nodes deterministically adjust the difficulty target based on the recent rate of block generation, with the aim of keeping the average time between new blocks at ten minutes.
So the changes are made at somewhat predictable paces, in this case roughly every 14 minutes, but the difficulty is adjusted based on demand. In other words, it's a little of both. Demand though will definitely affect the difficulty of the problems, but the demand is only updated every 2,016 blocks.
Only indirectly. More precisely the difficulty is based on supply of hashing power. If more people hash, the blocks will be minted faster and the difficulty will be adjusted higher at the next re-adjustment. It doesn't really matter if those blocks are actually full or empty, and in fact the system would continue to work if most of the blocks were empty and the trading happened off the chain in exchanges.
I say indirectly because the amount of hashing power on the chain at any given moment is driven by the expected reward per block minted. Nobody wants to run thirsty machines if the cost of electricity exceeds the expected rewards for successfully minting a block. So the number of machines online and is directly proportional to the value of bitcoin, which is driven by consumer demand.
3. It continues to be used very little/nothing in the legitimate financial system while being used for blackmail, drug trade, crypto trade etc. Price $1000.
This is not how proof of work functions. Hash rate and price are not directly related, they are somewhat correlated because when the price goes up it becomes more profitable to mine. Bitcoin doesn't need more hash rate for the price to go up - the price is the independent variable and the hash rate is the dependent variable.
It's really not as simple as hash rate = price. It's more so that they are correlated in direction of change.
The whole point of proof of work is that it is proof that someone has spent the value in electricity validating a block.
As the price of bitcoin rises, naturally more and more miners will beef up their rigs (that is, spend more money in infrastructure and electricity) to mine BTC, because the rewards and fees are worth more. Note if they didn't do this, anyone could easily have a "free money" arbitrage play, and basic economics says that discrepancy in prices (i.e. the value of a BTC on the market and the cost to mine one) must be arbitraged away.
Think of it this way, if hash rate is independent of price, why does it take the electricity output of Argentina to run the network? It certainly didn't take that much years ago. The reason being that as BTC becomes more valuable there is more reward and thus more competition for miners to mine. As that happens, the hash rate will rise as more power is added to the network.
I agree that Proof of Work has a severe scaling problem; which is why I expect Proof of Stake to outcompete PoW (a token with lower transaction costs being inherently more desirable as a store of value). AFAICT PoS scales linearly: as the market cap goes up, the opportunity cost of locking tokens, and the mining rewards, both go up proportionally. It'll be interesting to see if BTC maxi culture sees the writing on the wall, or sticks to their guns to the bitter end; even if they're right that it's a better security model (I'm doubtful), it wouldn't be the first time that "good enough" won the market.
I suppose the biggest reason that we'll never see PoW vanish completely, even if carbon-taxed or outlawed by most states, is the massive capital outlay in ASIC mining hardware, which literally has no other use. There'll always be a desire to recoup that investment, and an incentive to foster "true believers" to maintain demand.
Simply put, there's just no path forwards where Bitcoin retains it's value long-term. Other crypto is harder to grok (often intentionally so), but I suspect they'll meet a similar fate once the media attention blows over.
That is actually one of the strongest arguments, to my mind, for why some variant of a cryptocurrency will survive as a store of value. Gold kind of "organically" found its way into value almost precisely because it is backed by the physical laws of nature. Cryptocurrencies went up a level to be backed by the laws of mathematics.
Bitcoin is also a Schelling point.
Making gold has always been the holy grail of chemistry. It's only valuable because chemistry says you can't make it easily.
Seems to me like bitcoin could keep seesawing on the fringes of relevance for a while. And people still buy tulips and beanie babies, albeit not anywhere near the prices at their height.
Tulips are pretty flowers.
Beanie babies are cute toys that you can play with.
Bitcoin is a purely virtual financial instrument. It has no purpose other than to be worth money.
Where does this belief come from?
Dollars are also a major part of the financial system, at yet each dollar is only worth $1.
This depends on the value of bitcoin, true, but also the amount users are paying in fees and the reward era we are in (see https://en.bitcoin.it/wiki/Controlled_supply).
Why? I keep seeing this claim and it makes no sense to me.
Of course, they would beef up their rigs (spending commensurately more in electricity), and the required hash difficulty would go up to keep the mining speed at a block per 10 minutes.
Another way to think of it, is why do you think the electricity requirements of Bitcoin are now the output of Argentina? Years ago they were a teeny fraction of that. As Bitcoin became more valuable, the competition for mining increased, so the hash difficulty adjusted to ensure the new block rate matched the higher wattage miners were willing to put in to increase their hash rates.
There is a guaranteed deep correlation between BTC price and amount of electricity needed to run the BTC network. That is the way proof of work is designed to function. I.e the whole way it protects against a 51% attack. There is simply no getting around this.
""" If 1 coin costs $50,000, and you already own the rig, it's worth spending $49,999 on electricity to mine the next coin and you will make a profit. If you're rig can't do that, you're better off just turning it off. """
Note that this is how it worked for bitcoin startup five years ago once the first specialized bitcoin rigs came into being. When the price of electricity where they operated became too high, some startup shut out or just changed their operations to create value around BTC(email/photograph ID/validation on the blockchain or other stuff like that)
> anything in between is just a probability calculation of whether it will end up at one end or the other.
There is some strong assumption you’re leaving out here.
1. The world decides it's "tulips" at some point, and the value goes to 0.
2. The world decides it will be a major part of the financial system, and it goes to 500k or 1 million.
Basically, anything in between is just a probability calculation of whether it will end up at one end or the other.
The problem with this, though, is that the way proof of work works means that it is impossible that it will ever go to a million. The amount of electricity needed to protect the network is directly tied to the price of BTC. This is not just some small, inconvenient detail. It is inherent to how proof of work functions. So if it takes the electrical output of, say, Argentina to run Bitcoin now, it will take the output of China to run it when it's up around a million, and that obviously is untenable.
Other cryptocurrencies have seen the writing on the wall and are moving to proof of stake (not without other issues). But the politics of Bitcoin mining, and the few large mining groups, makes it hard for me to see how this happens.